Northern Virginia's Office Sales Beat DC in Q1

Rendering of the Wegmans grocery store coming to Chantilly

WASHINGTON, DC—For the first time since 2006, office investment sales volume in Northern Virginia surpassed Washington DC in Q1, according to new stats from JLL.  For the quarter, a total of 17 offices traded in Northern Virginia totaling $763.4 million. These deals accounted for 52.2% of activity in the region, outpacing DC, which claimed a 40.4% share, and Suburban Maryland, which claimed 7.4% of activity for the quarter. A Strong Leasing Environment The suburb’s strong leasing environment of the last few quarters is now being reflected in investment sales, JLL explains. Conditions are tightening in particular in the suburban markets of Westfields, Reston, Merrifield, Rockville Pike and the Bethesda-CBD and owners are exiting in order to sell into the positive fundamentals, according to JLL Managing Director Bill Prutting. That trend, coupled with investors’ ability to find higher yields in the suburbs, produced Northern Virginia’s strong Q1 performance. Prutting noted that the average cap rates in Northern Virginia were 150 basis points higher than in DC last quarter. For the most part, these deals were close to metro stations, but there is a distinct trend by investors to consider investments that are not transit-oriented, Prutting tells GlobeSt.com. Suburbs Have A Story Too In fact, he says right now most of the deals on the market right now are in non-metro served locations.  “Investors realize there is a sustainable story for these locations as well.” For example, Westfields in Northern Virginia has been a market in the doldrums for several years. Now, growing demand by the federal government and new projects underway that will increase amenities — namely Regency Centers’ development plans for an 21-acre site that will include the first Wegmans grocery store in Chantilly — have raised the submarket’s profile among investors considerably. There is a significant pipeline for both Northern Virginia and suburban Maryland for Q2, Prutting added, “and we expect much of it will trade very efficiently.” Investors Have Enough Choice to Be Selective Much — but hardly all. Another trend Prutting has spotted is an increasingly selectivity on the part of investors. A strong pipeline also means that investors are seeing a lot of deals in which they could invest right now. As a result, some of the deals in the pipeline simply won’t find buyers.